The approaches described in this section could be pursued, but are not necessarily approaches that have been previously conceived or pursued. Therefore, unless otherwise indicated herein, the approaches described in this section are not prior art to the claims in this application and are not admitted to be prior art by inclusion in this section.
Many jurisdictions (e.g., states) provide certain industries with special rules on how to compute the numerator amount of some items that must be included in the state's sales, property, payroll or other factor when performing the state income tax computations. For example, cable subscriber revenue to be included in the state's sales numerator by a cable provider may be driven by the number of cable subscribers. In this case, cable subscriber revenue to be included in the state's sales numerator may be calculated as total cable subscriber revenue (across all states) times the number of cable subscribers in-state divided by the total number of cable subscribers.
Some other examples of special rules on how to compute the numerator amount are listed below. Airline ticket sales to be included in the state's sales numerator may be computed as total ticket sales times the number of flight take-offs in-state divided by the total number of flight take-offs. Aircraft property to be included in the state's property numerator may be calculated as total aircraft value times the number of flight take-offs in-state divided by the total number of flight take-offs. Railroad sales to be included in the state's sales numerator may be computed as total sales times the number of miles of tracks in-state divided by total miles of tracks.
The procedure of apportioning a given item of sales, property, payroll or other factor before including it in the state's factor numerator may be referred to as special apportionment. A driver used in the apportionment computation (e.g., the number of subscribers in the first example above) may be referred to as a special apportionment method. The dollar value of an item that must be apportioned across states may be captured in a special apportionment account. An account may be associated with a legal entity (e.g., a corporation), a sub-entity (e.g., a service or a product line within a corporation), a flow-through entity (e.g., a partnership), etc.
Many states allow taxpayers to select a special apportionment method for a given special apportionment account from a set of permitted special apportionment methods. For example, a state may allow apportioning ticket sales based on the number of flight takeoffs taking place in the state, as well as based on the number of miles flown above the state's territory, and leave a taxpayer the freedom to select which one of the two special apportionment methods to use. Changing a special apportionment method used for a given special apportionment account in a given state can have a sizable impact on the taxpayer's state income tax liability.